“It is not the strongest or the most intelligent who will survive but those who can best manage change.” ~Charles Darwin
Over the past five years the consulting industry has experienced negative growth. Between 2015-2020 the industry declined by 0.7%. The prediction is that this decline will continue as the world grapples with the economic downturn and reduced business confidence resulting from the Covid-19 pandemic. The competition for the ‘Big 5’ has also increased, as smaller consultancies provide a more attractive cost-benefit outcome. Some organisations are also finding it more advantageous to build internal consultancy teams, costing a fraction of the price of one consultancy project. Also thanks to the endless information available on the internet it is easy for people to seek and find a world of advice for free. So as Darwin suggests, even though the large consultancy firms are full of incredibly smart people, and have massive organisational infrastructure, we have seen far too many big business failures to know that this does not guarantee their survival.
In fact, consultancies, who gain so much income from helping others survive and thrive through change, now need to look inwards and do this work for themselves. One of the most important questions they need to ask is what role they can play in the new business environment which is characterised by volatility, uncertainty, complexity and ambiguity (VUCA). How can they help their clients navigate through these situations, and what value can they offer that can justify their hourly rates?
While many people treat the VUCA context as one big challenge, each element does actually require different strategic responses. Therefore, the role consultancies can play for their clients will differ depending on the specific situation they are facing, which will in turn create different demands for the consultancies own organisational structures and processes. Here are my initial thoughts about what this may look like.
This analysis, while brief and arguably simplistic, does suggest some changes required to the traditional consultancy business model, including:
Decentralization of resources. To be able to respond to client needs, the options are to have a bunch of slack resources in-house or to have a stock of flexible resources that can be gathered and deployed quickly. The former was certainly the preferred model, with the profits able to wear a plethora of graduates sitting ‘on the bench’ awaiting assignment. Declining profits suggest that this centralized resource model is no longer sustainable and more of a ‘freelance’ model of gathering consultancy resources would be more appropriate. Of course, the challenge with this change would be how you indoctrinate the brand in a decentralized model? There is real risk of diluting the powerful brand that has taken so much effort to create and maintain.
Boundary-spanning. Gathering data and insights fast may require having networks of experts outside of your own organization. There is a real gap in leadership ability to play this boundary spanning role themselves. While 86% of senior-level executives admit effective cross-boundary coordination is extremely important, only 7% admit to feeling effective at doing it. There is a huge gap in competency here that consultancies could fill to help their clients manage uncertainty. The challenge with this change is that it pushes consultancies to concede that they may not know everything themselves, and to play the role of connector rather than relying on being the sole authority.
Taking action to reduce complexity. Many consultancies have a vested interest in maintaining complexity as it sustains their business. However, to remove the perception of self-interest, they may need to use their intelligence and strength to reduce complexity for their clients. Why would they do this if it reduces their business? Well maybe for a higher purpose or goal beyond lining the pockets of partners and shareholders. This is the vision that the consultancies need to develop and invest in for themselves.
Shifting from consultants from partners. One of the benefits of being a consultant is that you can hand over the report or install the system and you don’t have to deal with the results. As experimentation becomes more essential to navigate ambiguous business environments, consultants will need to be involved in the implementation of the experiment as well in order to see through the whole learning process. The challenge with this change is that experiments are risky, and if consultants are advising on taking risky action, then increasingly they may be expected to be invested in the whole process – to be more accountable and to be part of the learning cycle with the client.
Facilitating questions instead of answers. In VUCA environments there may not be many answers. Instead, it is about building the ability to ask the right questions. Consultants have gained their powerful positions by delivering solutions. But no longer is the trend to be ‘solutions-focused’. It is being ‘insight-driven’. Gaining insights relies on asking the right questions in the first place. Instead of handing over results for approval and execution, consultants will then need to be working with clients to find the best questions to explore further. The challenge with this change is that the consultancy deliverables become a lot less tangible. Here you are working to build capability which is a much longer-term pursuit and requires much greater dedication to tracking the results.
In some ways I see the Big 5 firms very similar to the large political parties, major banks or department stores. Much is invested in the all-powerful brand, arguably to the detriment of the overall outcomes. Trust is lost somewhere in the massive machinery and the perceived play of self-interest. Wouldn’t it be a very interesting day if some of the Big-5 joined forces to deliver a great community outcome? Wow, this would be as exciting as having a bi-partisan political approach to climate change!
The declining industry growth suggests that businesses and governments are no longer interested in just paying consultancies to come in, take their watch and tell them the time. External validation is no longer a sufficient reason to justify the high consultancy costs. Instead, they will need to take their own advice and become truly customer-centric – delivering those things the clients actually need to survive in a VUCA environment.
The Big 5 consultancies are very smart, and very strong. But let’s see if they are able successfully implement change in their own organizations. But perhaps you shouldn’t listen to me. As they say…
Don’t base your decisions on the advice of those who don’t have to deal with the results.
A curly question…
Where do the Big 5 consultancies go when they need an objective perspective on their businesses?
An Interesting Fact
Three out of the Big 5 Animals of Africa have a conservation status of either vulnerable or endangered. These are the African Elephant, the Black Rhinoceros and the Lion. A fourth, the Leopard, is classified as near threatened.
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Yip, Jeffrey & Ernst, Chris & Campbell, Michale. (2009). Boundary Spanning Leadership: Mission Critical Perspectives from the Executive Suite.